TIDMABF
RNS Number : 6245L
Associated British Foods PLC
14 January 2021
14 January 2021
Associated British Foods plc
Trading update
Associated British Foods plc today issues a trading update for
the 16 weeks to 2 January 2021 covering the group businesses and
the significant trading developments in Primark since the AGM
trading update on 4 December and the update of temporary Primark
store closures on 31 December.
Group revenue
Group revenue from continuing operations for the 16 weeks ended
2 January 2021 was 13% lower than the same period last year, at
constant currency. At actual exchange rates, revenue from
continuing operations was 12% lower than the comparable period in
the last financial year. The following table sets out revenue on a
segmental basis for the period with changes at constant currency to
the prior year.
Year to Last Year
date
GBPm GBPm
Grocery 1,222 1,142 +7%
Sugar 545 512 +6%
Agriculture 507 463 +10%
Ingredients 497 484 +3%
Total
Food 2,771 2,601 +7%
Retail 2,031 2,904 -30%
Group 4,802 5,505 -13%
Following a strong performance in our last financial year,
trading across Grocery, Sugar, Agriculture and Ingredients has been
ahead of both expectation and last year in this period.
The Retail performance was materially impacted by the increased
restrictions on the movement of people and trading activity
announced and put in place again by UK and European governments,
principally during November and late December, to limit the spread
of COVID-19. Our estimate for the loss of sales in the periods of
closure during these 16 weeks is GBP540m. While stores were open,
trading was strong given the circumstances, with sales at -14% on a
like-for-like basis compared to last year. We opened five new
stores in this period with a very positive customer reaction.
Retail
Primark sales were 30% lower than last year at constant currency
and 28% lower at actual exchange rates. This period has been
characterised by the impact on our trading activities of the
varying restrictions on the movement of people put in place by UK
and European governments to limit the spread of COVID-19. These
measures have ranged from restricted trading hours to complete
closure of stores. Our estimate for the loss of sales in the
periods of closure during these 16 weeks is GBP540m.
While stores were open, trading was strong with sales at -14% on
a like-for-like basis compared to last year. Performance has varied
by store, reflecting the prevailing circumstances of our customers
at the time including home working, less commuting and much less
tourism. Sales at our stores in retail parks were higher than a
year ago, shopping centre and regional high street stores were
lower than last year and large destination city centre stores,
which are heavily reliant on tourism and commuters, continued to
see a significant decline in footfall. While stores were open, and
excluding our 16 major city destination stores, trading was
stronger at -10% on a like-for-like basis for the whole estate and,
excluding Boston, the trading performance of our US stores
continued to be strong and delivered sales in line with last year
on a like-for-like basis.
Sales were strong in those stores open during the festive
season, reflecting the excitement and broad appeal of the Primark
offering. In a number of stores we operated extended opening hours
in the lead up to Christmas to manage high customer demand and
spread shopping hours over a longer period of time. All Christmas
and gifting lines were sold out and the performance for "stay at
home" product categories was strong, especially in nightwear and
loungewear. The level of markdown was substantially lower than the
same period last year. We will warehouse some GBP200m of
autumn/winter stock for later this year. All orders placed with our
suppliers will be honoured.
We are implementing operational plans developed to manage the
consequences of the closures. As a result overhead costs have been
partially mitigated with some 25% of operating costs of the closed
stores being saved during the period.
As of today, 305 stores are closed which represent 76% of our
retail selling space.
Store overview Closed Stores
----------------- ---------------------
# of sq ft # of stores sq ft
stores
000 000
UK 190 7,552 190 7,552
Spain 50 2,050 10 368
Germany 32 1,841 32 1,841
Republic of
Ireland 36 1,076 36 1,076
France 19 996 - -
Netherlands 20 971 20 971
US 11 548 - -
Belgium 8 403 - -
Portugal 10 383 10 383
Austria 5 242 5 242
Italy 6 307 - -
Slovenia 1 46 1 46
Poland 1 40 1 40
------------- -------- ------- ------------ -------
Total 389 16,455 305 12,519
------------- -------- ------- ------------ -------
The uncertainty about store closure periods in the short term
has increased. Making the assumption that all of the stores
currently closed remain closed until the financial half year, at 27
February 2021, the loss of sales caused by temporary store closures
would reach some GBP1.05bn. This is up from our previous estimate,
based on announced closure dates, of GBP650m communicated on 31
December. We expect to partially mitigate the loss of contribution
by ensuring the continuation of the measures in place to deliver
savings of some 25% of the operating costs of those stores that are
closed.
On this basis, we expect the adjusted operating profit for
Primark in the first half to be broadly break-even, which would
compare to an adjusted operating profit of GBP441m for the same
period in the last financial year. We expect the group's net cash
before lease liabilities to be some GBP500m at the half year.
Under the scenario that the entire estate is closed imminently,
and remains closed until the end of March, we would expect to see
over the three month period a further loss of Primark sales of some
GBP0.8bn, and a consequent reduction in profit contribution of some
GBP0.3bn.
Retail selling space increased by 0.2m sq ft since the financial
year end and, at 2 January 2021, 389 stores were trading from 16.5m
sq ft which compared to 15.8m sq ft a year ago. Five new stores
were opened in the period: Barcelona Sant Cugat and Espacio Leon in
Spain, Sawgrass Mills Florida and American Dream New Jersey in the
US and Roma Maximo in Italy. In addition, we relocated to larger
premises in Southend UK. The very positive customer reaction to
these store openings, both in the US and in Europe, was striking
given the circumstances.
Although COVID-19 has delayed some store openings, we still
expect to add a net 0.7m sq ft of additional selling space in this
financial year. We expect to open 15 new stores: five in Spain,
three in the US, two in Italy, one in each of the UK, France and
the Netherlands, a further store in Poland, and our first store in
Czechia, Prague. Based on our successful resizing of several US
stores, we will downsize our Boston Downtown Crossing store to
38,000 sq ft. This will improve both store profitability and
customer experience.
Looking ahead, we continue to build the pipeline of new stores
with recently signed leases. New stores include Jamaica Avenue in
Queens New York, six in Italy, three in France, Katowice in Poland
and Brno in Czechia.
Sugar
AB Sugar revenue was 6% ahead of last year at constant currency
and in line at actual exchange rates. This was driven primarily by
higher average sugar prices for British Sugar, combined with record
bioethanol prices in recent months, and higher sugar prices in
Illovo. Operating profits are significantly ahead year-to-date. Our
expectation for the full year is unchanged, with operating profits
well ahead.
We expect that UK sugar production for the 2020/21 campaign will
be some 0.9m tonnes, well down on last year's 1.19m tonnes, due to
the severe impact of virus yellows disease on sugar beet. On 8
January the UK Government made the decision to permit the emergency
use of neonicotinoids as a seed treatment for sugar beet for next
year's UK crop.
Grocery
Grocery sales were higher than last year. Revenue increased 7%
at constant currency and 8% at actual exchange rates. Growth was
particularly strong in Twinings Ovaltine and our UK Grocery
businesses, which had the benefit of higher sales to international
customers ahead of the deadline for the end of the Brexit
transition period and continued higher volumes in retail grocery as
people spent more time at home during lockdown.
Ovaltine delivered a strong performance in this period in
developing markets and ACH experienced growth driven by higher
domestic consumption.
Agriculture
AB Agri revenue was 10% ahead of last year at both constant
currency and actual exchange rates.
Ingredients
Sales in Ingredients were 3% ahead of last year at constant
currency and 1% ahead at actual exchange rates. We have continued
to experience strong demand for retail yeast and retail bakery
ingredient products in AB Mauri.
Outlook
We suspended earnings guidance for the group on 16 March 2020
due to significantly increased uncertainty concerning the impact of
COVID-19 on business performance.
The impact of store closures on Primark's performance is
significant. We now expect full year sales and adjusted operating
profit for Primark to be somewhat lower than last year. We will
continue to expand retail selling space. The lower profitability of
Primark, and the consequent change in the weight of profit by tax
jurisdiction for the group will result in an increase in the
group's effective tax rate for the year from the 25% previously
advised.
The performance of Sugar, Grocery, Ingredients and Agriculture
has been very strong to date and for the full year our expectation
remains for adjusted operating profit in aggregate from these
businesses to be well ahead of last year.
Assuming that all the Primark stores that are currently closed
remain closed until the half year, we expect the group's net cash
before lease liabilities to be some GBP500m at the half year.
Brexit
Our businesses were well prepared for the end of the Brexit
transition period. As a result of the free trade agreement with the
EU, together with the UK's negotiation of trade continuity
agreements with other countries, we expect to see little impact
from changes in tariffs. At this early stage, we have seen no
material disruption to our supply chains.
ESG
The group intends to hold the first of a series of investor
events setting out its approach to Environmental, Social and
Governance (ESG) factors. The first of these events will be held on
Monday 1 March. Further details will follow in due course.
Note
Definitions of the alternative performance measures referred to
in this announcement can be found in note 30 of our Annual Report
and Accounts 2020.
For further enquiries please contact:
Associated British Foods
John Bason, Finance Director Tel: 020 7399 6500
Catherine Hicks, Corporate Affairs Director
Citigate Dewe Rogerson
Chris Barrie, Jos Bieneman Tel: 020 7638 9571
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